The prohibition on human-kidney sales is a perfect example of uncompensated third-party harms – negative externalities – inflicted on innocent people by political decision-making. A chief (tho’ not the only) reason given to justify this prohibition is that many people find the thought of a free-market in kidney sales to be distasteful. As a fellow student at UVA Law informed me 20 years ago, “I [my fellow student] just don’t want to live in a society that allows such commerce.” She advised that it’s just so distasteful that it shouldn’t be allowed to occur.

This woman was willing to vote for a policy that results in unnecessary suffering and premature deaths simply so that she and her tender sensibilities might be spared what for her is the unsavory knowledge that somewhere in America some people voluntarily and peacefully engage in exchanges that are mutually agreeable and, frequently, life-saving. Having her ‘say’ in other people’s lives – without her having to pay to exercise that say or to compensate those people harmed by her vote – is an instance of a politically induced negative externality.

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More broadly, this example highlights the strength of Carl Dahlman’s important 1979 argument (in the Journal of Law & Economics) that, ultimately, what is and what is not a policy-relevant externality is not a matter of objective science but, rather, of value judgments.

My law-school classmate from long ago might well reply that the psychic harm inflicted on her by the knowledge that legal kidney sales are taking place would itself be a negative externality unleashed by the legalization of such sales.

And she’d be correct. Or, at least, neither I nor anyone else would be able to disprove her positive claim of being severely psychically harmed by knowing that such legal sales occur.

Some value judgment must be exercised to weigh the value of saving people from suffering and dying prematurely against the value of saving the tender psyches of people such as my former classmate.

Most people, I believe, value saving innocent lives and preventing unnecessary physical suffering more highly than they value preventing the ethically sensitive among us from having to endure pangs of anguish caused by the knowledge that other people are buying and selling human kidneys. (This case isn’t close to being ‘close’ – for example, as between valuing the farmer’s desire to grow crops without worrying about those crops being set afire by sparks from a passing locomotive, and the railroad’s desire to run its train at top speed over its tracks that abut a cornfield.)

Trouble is, each person is intimately familiar with and concerned with his or her own personal psyche – each person gets the full measure of pleasure from gratifying that psyche and suffers the full measure of disappointment or anguish from irritating that psyche. A busybody – especially one unaware of the unintended economic and medical consequences of banning kidney sales – is too likely, then, to gratify his or her psyche by imposing uncompensated burdens on those people who wish to purchase kidneys and on those who wish to sell their kidneys.

If we agree that saving lives is more important than saving tender psyches, then the policy of preventing the buying and selling of kidneys at market prices inflicts on innocent third-parties a policy-relevant negative externality – and, frankly, one that is especially heinous.